Biotech Beat: Analysts Weigh In on the Ups and Downs of Valeant Pharmaceuticals Intl Inc (VRX) and Gilead Sciences, Inc. (GILD)

Analysts weigh in on biotech giants Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and Gilead Sciences, Inc. (NASDAQ:GILD). While Valeant has been dealing with a year of crises, Gilead has several positive developments in its pipeline. Analysts take a closer look, providing insight on both companies:

Valeant Pharmaceuticals Intl Inc

Analyst Irina Rivkind Koffler of Mizuho Securities weighed in on pharmaceutical giant Valeant in anticipation of updated 2016 guidance. Valeant has had an eventful year as it became the target of fraud allegations due to its relationship with specialty pharmacy Philidor, coupled with questions surrounding the company’s pricing practices. Koffler reiterated her Neutral rating on the company and slashed her price target from $112 to $70.

Koffler expects lowered 2016 guidance on an upcoming call with management and has therefore adjusted her model. The analyst’s revised model includes a revenue decrease to ~$11.7 billion, implying an EPS of $12.19. The analyst recognizes VRX as “having a relatively attractive portfolio, consisting of several ‘shiny objects’ like Xifaxan, Jublia, and consumer and contact lens assets.” However, “with its debt load and limited optionality, [she] still [sees] minimal upside.” Koffler believes that the company can pursue further efficiency improvements and maintain modest growth.

The analyst stated, “Single digit organic growth is likely achievable in 2017 via a combination of pricing and volume after the Salix deal annualizes.” Valeant acquired Salix, a producer of gastrointestinal drugs, last year and obtained valuable pipeline products with the acquisition.

Irina Rivkind Koffler is ranked #7 out of 3,776 analysts on TipRanks. The analyst has a 61%  success rate and a 33.3% average return per rating. According to TipRanks, 8 analysts are currently bullish on the stock, while 10 are sidelined and 1 is bearish. The average 12-month price target between these 19 analysts is $131.38, marking a 108% upside from current levels.

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Gilead Sciences, Inc.

Geoff Porges of Leerink Swann resumed coverage of Gilead following a recent positive change in perception of the company’s HIV franchise. The analyst “[remains] bullish about the durability of the franchise, and recent disclosures have reinforced that conviction.”

Porges assigned an Outperform rating on Gilead and increased his the 12-month target price from $125 to $130 due to Gilead’s promising developments in its plans for next-generation therapies and interventions for HIV. Gilead “dominates the market for treatments for two life-threatening viral diseases – HIV and HCV.” The treatments for these two diseases alone generated $30 billion in revenue for the biopharmaceutical company in 2015.

The company maintains a “positive outlook on the next-generation TAF-containing products near-term and those based on GS9883 mid- to long-term.” Porges stated, “Clinical data and current treatment unmet needs continue to support likely strong demand and market uptake of combination therapies of both.”

Analyst Geoff Porges has a 50% success rate on TipRanks with a 1.6% average return on recommendation. Gilead Sciences is rated as a stong buy based on 18 analyst ratings in the last 3 months, with 15 bullish and 3 sidelined. According to TipRanks, the average 12-month price target between these 18 analysts is $116.87, marking a 31.82% potential upside from where shares last closed.

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